One of the hot fads right now is ecosystems. HBR went so far as to say, “Today’s CEOs Don’t Just Lead Companies. They Lead Ecosystems.” While the article is interesting in asking leaders to think about the interconnectedness of their business, it fails to understand a simple premise that you can’t lead an ecosystem.
Some like Stelio Verzera, Nora Bateson, Kenneth Mikkelsen, and David K. Hurst go far in the opposite direction to say that using the word ecosystems in business is, at best inaccurate and, at worst dangerous (they are explicitly talking about the above-mentioned article). I think the word ecosystem can be a helpful analogy for how multiple organizations work with and compete against each other in the technology space, but it does require substantial reframing.
I am not alone in my thinking:
There is a parallel between a niche as a market and a species as a good or service. The economic web grows into its adjacent possible opportunities, and thus creates its own growing diversity, which leads to the growing econosphere, and the autocatalytic emergence of cambiodiversity.FN
When technologists use the word ecosystem, they usually talk about a platform and the third-party products built upon it. This is not an ecosystem. It is, at best, a niche within an ecosystem.
An ecosystem is a complex network of interconnected entities.
Apple does not have an app ecosystem. Companies build apps on their platform. This is a complicated network. Every app provider has a connection to Apple and may have connections to each other, but it is not complex, and it is not an ecosystem. Apple can make the rules and control the whole thing at this level.
If we take a step back, there is a smartphone ecosystem, and Apple (and the apps built on it) is part of that, but it is much larger. It includes Android, the various manufacturers of those devices, and the apps built upon that. There is a large degree of overlap in the apps for these platforms. It includes phone and accessory manufacturers, component manufacturers, cell phone network providers, and the list goes on. Those interrelationships are complex.
The borders of an ecosystem are hard to define.
The mobile phone ecosystem exists in a larger electronic communication ecosystem, including computers, the internet, feature phones, landlines, pagers, and more. The density of these devices is culturally, economically, and structurally dependent, as are the services built on these networks.
When you start seeing the intersections of these pieces and the more significant dynamics at play, it looks more like a natural ecosystem. And as you do, you note that the borders become harder to define, and the fractal nature of ecosystems shows the continual nesting of ecosystems within each other.
Ecosystems are emergent rather than constructed or planned.
As you start seeing the complexity of ecosystems and the difficulty of defining the borders, it becomes more and more apparent that you cannot construct or plan an ecosystem. It emerges.
Ecosystems take advantage of what Stuart Kauffman called the adjacent possible. But before we get to that, we need to talk about affordances. Gibson said, “The affordances of an environment are what it offers the animal, what it provides or furnishes, either for good or ill… they have to be measured relative to the animal.”fn In our case, what an ecosystem affords is relative to a unique organization. For one company, the iOS ecosystem afforded the ability to build a way to accept payments on your phone. For another, it was to create a social network based on photos.
Kauffman takes this further. He sees affordances as “Affordances are the alternative uses of a thing” 1 The example he often gives is the screwdriver. While its obvious usage is to screw things in and out, it also affords many other uses: you can open a can of paint or chisel ice.
The uses of a screwdriver depend sensitively on who is using it, when and where, for what purpose, the state of mind of the person using it, randomness, serendipity, and so on to form an unlistable state of dependencies. 2
This opens up the idea of the Adjacent Possible.
The adjacent possible contains the relevant and as-yet-unrealized possibilities to be realized by the agent in some next definable step in time 3
When anything new is created, it creates the potential for someone or something else to discover new affordances that can be realized as the Adjacent Possible.
Novelty begets novelty in a positive feedback loop. 4
A simple example of this is the humble mouse pad.
There was no latent market for mouse pads in 1870 or in 1970. Any attempt to sell “mouse pads” would surely have failed. No one had a use for them. There was no latent demand. Once personal computers with graphical interface software began to be sold to ordinary households, however, an economic niche for mouse pads opened up. There opened a latent market, which became actual and overt once suppliers began to offer them. 5
So as something new is created, a new economic niche opens up, and there is the opportunity for new products to fill that niche.
This brings us back to ecosystems. A new economic niche was formed when the iPhone launched (and more expressly when the App Store launched), resulting in new products. What was created added to that ecosystemic niche. Suppose you look at the broader smartphone ecosystem. Apple didn’t create it. They created the opportunity for portions of it to emerge, but what made it an ecosystem was the combination of what emerged and how that interconnected with other emerging things.
Hopefully, this clarifies why people are overhyping what they do when discussing ecosystem creation or ecosystem leadership. At the same time, I hope you also can see how valuable technology ecosystems are.
When done well, a software platform can form a new niche, adding variety and opportunities to expanding ecosystems. Attempts to control what will emerge can only limit the value.
- Devereaux, Abigail and Koppl, Roger and Kauffman, Stuart, Creative Evolution in Economics (January 13, 2023). Available at SSRN: https://ssrn.com/abstract=4324130 or http://dx.doi.org/10.2139/ssrn.4324130 ↩
- Devereaux, Abigail and Koppl, Roger and Kauffman, Stuart, Creative Evolution in Economics (January 13, 2023). Available at SSRN: https://ssrn.com/abstract=4324130 or http://dx.doi.org/10.2139/ssrn.4324130 ↩
- Devereaux, Abigail and Koppl, Roger and Kauffman, Stuart, Creative Evolution in Economics (January 13, 2023). Available at SSRN: https://ssrn.com/abstract=4324130 or http://dx.doi.org/10.2139/ssrn.4324130 ↩
- Cazzolla Gatti, R., Koppl, R., Fath, B.D. et al. On the emergence of ecological and economic niches. J Bioecon 22, 99–127 (2020). https://doi.org/10.1007/s10818-020-09295-4 ↩
- Cazzolla Gatti, R., Koppl, R., Fath, B.D. et al. On the emergence of ecological and economic niches. J Bioecon 22, 99–127 (2020). https://doi.org/10.1007/s10818-020-09295-4 ↩